[Federal Register Volume 72, Number 205 (Wednesday, October 24, 2007)]
[Notices]
[Pages 60400-60402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-20898]


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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-56671; File No. SR-ISE-2007-88]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to the Qualified Contingent Trade Exemption

 October 18, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 5, 2007, the International Securities Exchange, LLC (``ISE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the ISE. The 
ISE has designated the proposed rule change as ``non-controversial'' 
under Section 19(b)(3)(A)(iii) \3\ of the Act and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The ISE proposes to amend its rules to incorporate the qualified 
contingent trade exemption into ISE Rule 2107 (Priority and Execution 
of Orders). The text of the proposed rule change is available at the 
ISE, the Commission's

[[Page 60401]]

Public Reference Room, and www.ise.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the ISE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The ISE has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend ISE Rule 2107 (Priority and 
Execution of Orders) to incorporate the exemption granted by the 
Commission for qualified contingent trades from Rule 611(a) of 
Regulation NMS under the Act.\5\ In accordance with Rule 611 of 
Regulation NMS, ISE Rule 2107 governs the priority and execution of 
equity orders on the ISE Stock Exchange \6\ and prohibits orders from 
being executed at prices that are inferior to Protected Quotations \7\ 
available at other Trading Centers.\8\ ISE Rule 2107(c) provides Trade-
Through \9\ exceptions, as set forth in Rule 611 of Regulation NMS. 
Accordingly, the Exchange proposes to add the qualified contingent 
trade exemption to Rule 2107(c).
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    \5\ See Securities Exchange Act Release No. 54389 (August 31, 
2006), 71 FR 52829 (September 7, 2006) (order granting an exemption 
for each NMS stock component of certain qualified contingent trades 
from Rule 611(a) of Regulation NMS).
    \6\ The ISE Stock Exchange is a facility of ISE, LLC.
    \7\ See ISE Rule 2100(c)(16).
    \8\ See ISE Rule 2100(c)(20).
    \9\ See ISE Rule 2100(c)(19).
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    A contingent trade ``is a multi-component trade involving orders 
for a security and a related derivative, or, in the alternative, orders 
for related securities, that are executed at or near the same time.'' 
Proposed Rule 2107(c)(8) provides an exemption for any Trade-Throughs 
caused by the execution of an order involving one or more NMS stocks 
(each an ``Exempted Stock Transaction'') that are components of a 
qualified contingent trade. A ``qualified contingent trade'' is a 
transaction consisting of two or more component orders, executed as 
agent or principal, where: (1) At least one component order is in an 
NMS stock; (2) all components are effected with a product or price 
contingency that has been agreed to by the parties; (3) the execution 
of one component is contingent upon the execution of all other 
components at or near the same time; (4) the specific relationship 
between the component orders is determined at the time the contingent 
order is placed; (5) the component orders bear a derivative 
relationship to one another, represent different classes of shares of 
the same issuer, or involve the securities of participants in mergers 
or with intentions to merge that have been announced or since 
cancelled; (6) the exempted transaction is fully hedged as a result of 
the other components of the contingent trade; and (7) the exempted 
transaction that is part of a contingent trade involves at least 10,000 
shares or has a market value of at least $200,000.
    The Exchange also proposes to clean-up the rule text in the 
Supplementary Material to Rule 2107, which contains provisions 
applicable to trading in securities prior to the ``Trading Phase Date'' 
of Regulation NMS as that date has since past.

2. Statutory Basis

    The basis under the Act for this proposed rule change is found in 
Section 6(b)(5).\10\ Specifically, the Exchange believes the proposed 
rule change is consistent with Section 6(b)(5) requirements that the 
rules of an exchange be designed to promote just and equitable 
principles of trade, serve to remove impediments to and perfect the 
mechanism for a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition 
The proposed rule change does not impose any burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others The Exchange 
has not solicited, and does not intend to solicit, comments on this 
proposed rule change. The Exchange has not received any unsolicited 
written comments from members or other interested persons.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days after the date of filing, or such shorter time as the Commission 
may designate if consistent with the protection of investors and the 
public interest, the proposed rule change has become effective pursuant 
to Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\12\ As required under Rule 19b-4(f)(6)(iii),\13\ the 
ISE provided the Commission with written notice of its intent to file 
the proposed rule change, along with a brief description and text of 
the proposed rule change, at least five business days prior to the date 
of the filing of the proposed rule change.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\14\ 
However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The ISE requests that the Commission 
waive the 30-day operative delay period for ``non-controversial'' 
proposals under Rule 19b-4(f)(6) \16\ and make the proposed rule change 
effective and operative upon filing. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. The Commission notes that the 
proposed rule language is identical to language contained in the 
Commission's exemption for qualified contingent

[[Page 60402]]

trades.\17\ In addition, the Commission notes that the proposed rule 
language is identical to a rule of the Chicago Stock Exchange, Inc. 
previously approved by the Commission.\18\ Accordingly, the Commission 
designates the proposed rule change operative upon filing with the 
Commission.\19\
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    \14\ Id.
    \15\ Id.
    \16\ Id.
    \17\ See supra note 5.
    \18\ See Securities Exchange Act Release No. 54550 (September 
29, 2006), 71 FR 59563 (October 10, 2006) (order approving SR-CHX-
2006-05).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the impact of the proposed rule on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in the furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-ISE-2007-88 on the subject line.
Paper Comments
     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2007-88. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the ISE. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ISE-2007-88 and should be 
submitted on or before November 14, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-20898 Filed 10-23-07; 8:45 am]
BILLING CODE 8011-01-P